Nomura: Warsh's Hawkish Debut Stresses Prices; August Data May Keep Fed on Hold

Nomura Securities' August 28, 2026 report stated that Fed Chair Warsh's hawkish debut at Jackson Hole emphasized the importance of the inflation target, hinting that policy may need to respond if inflation does not decline fast enough, but he did not explicitly signal a near-term rate hike. Following the speech, the 2-year Treasury yield jumped 7 basis points, and market pricing for a September rate hike rose from 30% to above 50%. Nomura expects August core PCE at around 0.2% month-over-month, sufficient to support the Fed staying on hold, but sensitivity to data has increased significantly.

Warsh downplayed the significance of recent benign inflation readings and wage cooling, stating he does not see an improvement in the trend; meanwhile, he held a more optimistic view on the economy, seeing healthy consumption, rapid capital expenditure growth, and employment consistent with full employment. Nomura projects August nonfarm payrolls at +60,000, the unemployment rate falling to 4.0%, and has revised its Q3 GDP tracking estimate up to 3.6%. Nomura maintains its baseline view that the Fed stays on hold, but Warsh's hawkish tone implies that if the disinflation process stalls, rate hikes could be put on the table.

[TechFlow]